Budget 2016: Plea for North Sea oil tax breaks

George Osborne . Picture: Getty
George Osborne . Picture: Getty
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George Osborne has been urged to give tax breaks to Scotland’s North Sea oil industry ahead of his 2016 Budget.

The Chancellor is under pressure to deliver assistance to the stricken offshore sector, which has seen thousands of job losses linked to the dramatic fall in the oil price.

Last night John Swinney called for urgent action as industry experts renewed their call for a 20 per cent reduction in the headline rate of tax.

In a letter to the Chancellor, Mr Swinney said the tax burden facing the industry should be reduced substantially.

He also said fiscal barriers to exploration in the North Sea should be tackled as well as improved access to decommissioning tax relief and urgent consideration of non-fiscal support, such as government loan guarantees.

Mr Swinney said: “UK government inaction at this time could threaten the prosperity of the oil and gas industry.

“I look forward to the steps I hope the Chancellor will take to support the oil and gas industry in the Budget.”

Today Mr Osborne is expected to deliver a Budget that will give a tax cut to middle 
classes by confirming his intention to raise the £42,385 earning threshold before workers pay the higher 40 pence tax rate.

He is also expected to set out plans to accelerate progress on proposals to eventually push the threshold up to £50,000.

His income tax plans will be keenly watched by Nicola Sturgeon who has already signalled her intention not to pass on the tax break to Scotland – a move that will see the better paid in Scotland fork out more than their counterparts south of the Border.

Mr Osborne is expected to offer assistance to the oil industry, but last night the Treasury remained tight-lipped on precisely what steps will be taken.

Oil and Gas UK believe there must be a reduction of 20 percentage points in the main tax rate, which ranges from 50 per cent to 67.5 per cent.

The industry body also wants the UK government to scrap a second levy called the Petroleum Revenue Tax, which stands at 35 per cent.

Mike Tholen, Oil and Gas UK’s economics director, has said today’s Budget is the “perfect opportunity” for Mr Osborne to signal to investors his long term ambition for the sector.

The Chancellor is also expected to make further cuts to public spending as he attempts to get the economy back to surplus.

Last night Scottish Labour leader Kezia Dugdale warned against further austerity saying Mr Osborne “needs to stop his race to cut to the bone”.